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Thursday, October 30, 2014

Damned By Faint Praise

Paul Krugman recently penned a piece for Rolling Stone Magazine called "In Defense of Obama" which has the temerity to assert that Obama has actually been an effective president. Krugman basic argument falls into seven main points: (1) Obama has had to deal with hostile Republicans; (2) Obamacare has been a success; (3) financial reform (via the Dodd-Frank bill) has been a success; (4) the economy is better; (5) the environment is better; (6) he's been okay at national security issues; and (7) positive social change. Anyone with a modicum of intelligence will realize that Krugman's assertions are incorrect. Anyone with a shred of intellectual honesty would never have made these points.

Dealing with hostile Republicans.

Krugman writes:

He faced scorched-earth Republican opposition from Day One, and it took him years to start dealing with that opposition realistically. Furthermore, he came perilously close to doing terrible things to the U.S. safety net in pursuit of a budget Grand Bargain; we were saved from significant cuts to Social Security and a rise in the Medicare age only by Republican greed, the GOP's unwillingness to make even token concessions.

There are two general points that prove the fallacy of this point. First, and most obvious point that for the first two years of his Presidency, Obama dealt with both a House and Senate held by Democrats. Even after Republicans retook the House in 2012, Obama has had a friendly Senate. Krugman does not address this because it merely underscores how ineffective Obama had been.

In fact, research from Pew has shown that the American public, in general, has become more politically polarized in the past decade. That is, even as late as 2004, the median Republican was very close in political outlook to the median Democrat. However, by 2014, 92% of Republicans are to the right of the median Democrat, and 94% of Democrats are to the left of the median Republican. Most of the movement has been among Democrats. The cited article states that:

Today, almost four-in-ten (38%) politically engaged Democrats are consistent liberals, up from just 8% in 1994. The change among Republicans since then appears less dramatic – 33% express consistently conservative views, up from 23% in the midst of the 1994 “Republican Revolution.”

In both parties, the shares expressing mostly ideological views have increased, but in very different ways. The percentage of Democrats who are liberal on all or most value dimensions has nearly doubled from just 30% in 1994 to 56% today. The share who are consistently liberal has quadrupled from just 5% to 23% over the past 20 years.

In absolute terms, the ideological shift among Republicans has been more modest. In 1994, 45% of Republicans were right-of-center, with 13% consistently conservative. Those figures are up to 53% and 20% today.

Both the article and the Pew report attempt to minimize the Democrat shift by pointing out that Republicans became more moderate approaching 2004, and then have shifted back to becoming more conservative. However, that only indicates that the Republican shift was reactionary, not that the Republican shift has driven the divide. In the end, both parties have become more partisan, but it is the Democrats that have shifted the most. Thus, the implicit thesis in Krugman's argument--that Republicans have become more intractable while the Democrats have not--is false.

Has Obamacare Been a Success?
Krugman writes:

Still, Obamacare means a huge improvement in the quality of life for tens of millions of Americans – not just better care, but greater financial security. And even those who were already insured have gained both security and freedom, because they now have a guarantee of coverage if they lose or change jobs.

What about the costs? Here, too, the news is better than anyone expected. In 2014, premiums on the insurance policies offered through the Obamacare exchanges were well below those originally projected by the Congressional Budget Office, and the available data indicates a mix of modest increases and actual reductions for 2015 – which is very good in a sector where premiums normally increase five percent or more each year. More broadly, overall health spending has slowed substantially, with the cost-control features of the ACA probably deserving some of the credit.

He declares the ACA to be a success.

Well, from my personal standpoint, it has brought a lot of change, but not a lot of hope. In order to obtain an Affordable Care Act (ACA) compliant plan this year from the same insurer that is roughly comparable to my current plan in terms of deductible, total out-of-pocket, and so on, would result in a premium increase of almost 50%. Looking at other possible insurers for the business I work at, in order to keep costs increases down to a moderate level would require accepting plans with higher premiums and higher out-of-pocket limits and the consumer having to foot more of the bill until meeting the deductible.

The other main purpose of the ACA was to lower health insurance premiums. As of late last year and the early part of this year, even those willing to give the Obama Administration the benefit of the doubt conceded that it was not clear whether costs would rise more than at normal rates. However, more recent data has shown that premiums will rise by 49% on average. Of course, since the Administration is hiding the official numbers until after the mid-term elections, the full impact will not be fully appreciated until later. In any event, this is another purpose at which the ACA has been a failure.

In short, liberals can only declare the ACA to be a success because it was not a complete failure. But it has failed at its two basic purposes, which makes it a failure in my book.

Financial Reform.
Krugman initially points out:

Let's be clear: The financial crisis should have been followed by a drastic crackdown on Wall Street abuses, and it wasn't. No important figures have gone to jail; bad banks and other financial institutions, from Citigroup to Goldman, were bailed out with few strings attached; and there has been nothing like the wholesale restructuring and reining in of finance that took place in the 1930s. Obama bears a considerable part of the blame for this disappointing response. It was his Treasury secretary and his attorney general who chose to treat finance with kid gloves.

Nevertheless, he apparently still considers Obama to have done well in this category simply because of Dodd-Frank. Krugman's reasoning? "But it's a lot better than nothing." Damned by faint praise.

The debate over whether federal officials believe the largest banks are still too big to fail ended this week in Washington. After examining the second drafts of "living wills" that each bank is required to submit under the 2010 Dodd-Frank law, financial regulators voted unanimously that not one of the country's 11 most complicated banks would be able to enter bankruptcy without causing dire economic consequences.

The Federal Reserve and the Federal Deposit Insurance Corporation jointly announced that the giant banks did not have adequate plans in the event of distress or failure. The FDIC board was especially pungent, finding that the plans submitted by the 11 giants "are not credible and do not facilitate an orderly resolution under the U.S. Bankruptcy Code." The Fed said the shortcomings include "unsupported expectations regarding the international resolution process" and "failures to address structural and organizational impediments to an orderly resolution."

In a separate statement, FDIC Vice Chairman Thomas Hoenig sent a more direct warning to taxpayers: "Despite the thousands of pages of material these firms submitted, the plans provide no credible or clear path through bankruptcy that doesn't require unrealistic assumptions and direct or indirect public support."

But one of the oddest, and surprising, attacks on the law this week came from a paper by two economists, Sohhyun Chung and Jussi Keppo, with an assist from WSJ. The paper found that the Volcker Rule, the part of Dodd-Frank that bans a lot of risky trading at the big banks, has actually made banks more likely to fail and less valuable.

How, you might ask? The paper argues that when you prevent banks from making risky bets with their own money, they won’t stop betting. They’re banks, after all. Instead, they will put more of their money into stuff that is less risky. And they will lend more, which is also risky, but allowed by Dodd-Frank. Also, the banks will pay dividends, which doesn’t sound risky. But if you allow banks to use their capital to pay dividends, they won’t have as much money around to cover loans when they go bad.

Journal reporter John Carney chimed in that, as the paper predicts, banks are holding more Treasury bonds, up 23% in the first quarter of 2014, than before the Volcker Rule was finalized last year. The Volcker Rule, Carney wrote, has sprung a leak.

More evidence that the Volcker Rule isn’t working: JPMorgan Chase’s second quarter. The nation’s largest bank’s value-at-risk was up by 22% from a year ago. And remember, the second quarter was at a time when volatility and risk seemed to be plunging on Wall Street.

But JPMorgan doesn’t seem to be loading up on Treasury bonds or other investments that may be risky but are still allowed by Volcker. Its Treasury bond holdings, for instance, are down 28% in the past year. So, if JPMorgan’s risk is up, it’s because it is trading more risky stuff, not because of a loophole in the Volcker Rule.

Barack Obama might not have been elected president without the 2008 financial crisis; he certainly wouldn't have had the House majority and the brief filibuster-proof Senate majority that made health reform possible. So it's very disappointing that six years into his presidency, the U.S. economy is still a long way from being fully recovered.

Before we ask why, however, we should note that things could have been worse. In fact, in other times and places they have been worse. ...

(Underline added). Of course, Krugman's opinion as to what should have been done would have been to spend more, especially on welfare and entitlements.

Things may have been worse, but that is hardly enough to call Obama's policies successful.

The Environment.

On this point, Krugman writes:

In 2009, it looked, briefly, as if we might be about to get real on the issue of climate change. A fairly comprehensive bill establishing a cap-and-trade system to limit greenhouse-gas emissions actually passed the House, and visions of global action danced like sugarplums in environmentalists' heads. But the legislation stalled in the Senate, and Republican victory in the 2010 midterms put an end to that fantasy. Ever since, the only way forward has been through executive action based on existing legislation, which is a poor substitute for the new laws we need.

But as with financial reform, acknowledging the inadequacy of what has been done doesn't mean that nothing has been achieved. Saying that Obama has been the best environmental president in a long time is actually faint praise, since George W. Bush was terrible and Bill Clinton didn't get much done. Still, it's true, and there's reason to hope for a lot more over the next two years.

He praise for Obama stems from there being more alternative energy--solar and wind power--than before (Solindra, anyone?); action to curb green-house emissions through EPA regulations (killing the coal industry, anyone?); and raising the mileage standards on cars (not that the middle-class can afford new cars).

I've posted so much about the myth of global warming that I do not believe it is worth while to repeat it here. Just let me say that Obama drowning us in additional regulatory burdens and pushing inefficient forms of energy production to "fix" an imaginary problem is not a success. It is fascism.

National Security.

Krugman has little praise for Obama here, simply stating:

What I would say is that even if Obama is just an ordinary president on national security issues, that's a huge improvement over what came before and what we would have had if John McCain or Mitt Romney had won. It's hard to get excited about a policy of not going to war gratuitously, but it's a big deal compared with the alternative.

I'm not sure that Russian aggression in Europe, ISIS, Boko Haram, the collapse of Iraq, Chinese aggression in the South China Sea, the completely unjustified destruction of the Libyan government to be replaced by competing militias and terrorist groups, the death of an American ambassador by terrorists (with its accompanying cover-up), massive spying on American citizens, provisioning of weapons to Mexican drug cartels, Iran's continued development of nuclear weapons, Saudi Arabia seeking nuclear weapons from Pakistan, Taliban victory in Afghanistan, et cetera and so on, constitutes an improvement over what we would have had from McCain or Romney. Krugman is delusional if he believes otherwise.

Social Change.

Krugman counts this in favor of Obama because Obama has been a good follower. Krugman explains:

In 2004, social issues, along with national security, were cudgels the right used to bludgeon liberals – I like to say that Bush won re-election by posing as America's defender against gay married terrorists. Ten years later, and the scene is transformed: Democrats have turned these social issues – especially women's rights – against Republicans; gay marriage has been widely legalized with approval or at least indifference from the wider public. We have, in a remarkably short stretch of time, become a notably more tolerant, open-minded nation.

Barack Obama has been more a follower than a leader on these issues. But at least he has been willing to follow the country's new open-mindedness. ...

In other words, Krugman believes Obama should be praised because Obama has been such a good political opportunist.

I will acknowledge that marriage died with the advent of no-fault divorce, but to commend Obama for presiding over its last reflexive twitch is a little too much. As for women's rights, Krugman is not talking about equal pay (long mandated by law), because Obama pays women less. He is instead talking about Obama's support for abortion. Apparently Krugman thinks its great that millions of black and Hispanic babies are killed each year. Good Nazi.

Change simply for the sake of change is not commendable, especially when that change is simply digging a deeper hole. Obama fails on this front as well.

Conclusion.

Krugman's sycophantic piece seems like a desperate search to find something redeeming about his hero, without being able to do so. Krugman grasps at straws, twists reality to mask his disappointment. He is like the mother of a murderer crying out in desperation: "But he was such a sweet little boy!"